Why Lubricant Supply Contracts No Longer Go to the Lowest Bidder

Jim Fitch, Noria Corporation
Tags: industrial lubricants

Maybe you haven’t heard. It’s no longer just about the lubricant, its performance, quality or price. The days of awarding a supply contract to the lowest bidder which happens to be a national brand is not a forgone conclusion. Much more is at stake and many factors impinge on this important decision. Indeed things have changed in the world of lubrication - one could say the field is starting to reinvent itself.

Today’s lubricant customer is more sophisticated and demanding. The watchwords are “world-class” and “core competency”. It has been said that if you want world-class reliability you need world-class lubrication. To be world-class at lubrication means you must have world-class . . .

  • lubrication technicians
  • procedures and practices
  • oil analysis and program metrics
  • lubrication supply

Though typically treated as a commodity by many, the lubricant is a vital component of the machine. For many organizations, the quality of lubrication is the single greatest factor that influences machinery reliability and productivity. Sure, without any lubrication, the machine won’t run. But the quality of lubrication also affects machine reliability and efficient operation in less obvious ways.

Many of today’s lubricant suppliers offer an a la carte program of goods and services. Some offer full service, while others serve niche-specific markets, each with varying value propositions. There are many differentiating factors among lubricant suppliers. For this reason, matching the product/services mix to real applications and business needs is the challenge at hand.

The user organization must decide whether it wants to strictly buy lubricants or if it wants to purchase lubrication with services bundled in. If your intention is to just buy lubricants, you could be paying extra for unwanted services like oil analysis and technical support. If your desire is to buy lubrication, be sure you’ve optimized the content of your value package . . . taking no more or no less than you want. Often lubrication services go unclaimed due to a lack of execution by the supplier or lack of understanding by the customer. Sometimes the customer is simply unaware of the availability or importance of strategic program elements. With that said, perhaps it’s time to revisit the many questions and issues that surround the lubricant supply decision. Consider the following:

Application Match
Base Oil
Does the machine application, including thermal, energy conserving, and service life issues, demand the use of specific base oils, for example: synthetic, hydrocracked or mineral (Group I, II)? How about biodegradability, toxicity and food-grade requirements? Is it compatible with machine finishes, coatings, seals, etc.?

Viscosity
Do the suppliers’ products come in a suitable range of viscosities for each grade?

Additives
Are additives compatible with machine metallurgy, elastomers, coatings, seals and operating environment?

Custom Formulations
Will the supplier assist with custom formulations where catalog products won’t serve application requirements?

Contamination
Is the lubricant (base oil and additives) compatible with close-proximity contaminants such as caustics, nuclear radiation, ammonia, refrigerants, natural gas, H2S, etc.?

Compliance
Do lubricants meet industry, government, OEM, requirements/regulations - including any outlined by NLGI, API, GM LS-2, ASTM, GE, US Steel, SAE, ISO, NRA, AGMA and IP?tion, ammonia, refrigerants, natural gas, H2S, etc.?

Performance and Quality
Performance Tests
Do published product performance data meet or exceed machine requirements or client expectations? Does the published test data represent typical products or minimum performance standards? Has independent lab testing been used to validate performance data for the finished products, or has the data simply been passed down by the additive supplier?

Reputation
Is the supplier or brand known for performance-formulated lubricants or price-formulated lubricants? How does this match the needs of the customer?

Filterability
Can the lubricants be filtered to the required levels without loss or damage of critical additives?

Cleanliness and Dryness
What specifications will be provided relating to cleanliness and dryness of new lubricants? Are inspections done with particle counters calibrated to ISO 11171?

Inspection Tests
What inspection tests are always performed on each batch of oil? How long are retains kept? Is inspection test data made available to customers on request?

Storage Stability
Does the supplier publish specific information on the storage life (shelf life) of each lubricant product under typical and extreme storage conditions?

Compatibility Testing
Will the supplier provide compatibility testing for lubricants (including grease thickeners) that will be part of a
change-out from another brand (say associated with unavoidable mixing)? What tests will be conducted as a part of the compatibility study?

Incoming Lubricant Inspections
How will inspection tests by the customer for incoming lubricant deliveries be handled? What tests will be performed and mutually agreed between the supplier and customer? How will oil be sampled, including the first and last oil from pump discharge (bulk transports)? How will noncomplying lubricants that are rejected by the customer be handled?

Service and Support
Field Engineers
How will field engineers and customer representatives be assigned? What are their technical qualifications? How frequently will field service people be available to visit the plant/mill? Will they be employed by the distributor or lubricant supplier?

On-site Support Services
Will field service people provide active support toward achieving world-class lubrication by routinely inspecting machinery, observing handling and relubrication practices, assisting with PM scheduling, inspecting lube stores conditions and observing oil sampling methods? What written documentation will be provided by the field service people following such visits?

Audit/Survey Services
Will the supplier provide occasional services to match lubricants to machine applications and to consolidate the number of products on-site? If so, can the cost of this service be unbundled to permit an independent service provider to conduct these audits/surveys if desired?

Training Services
Will training services be provided and at what cost, if any? Can this cost be unbundled from the pricing structure to allow the client to receive training from independent organizations if desired?

Oil Reclamation
Does the supplier offer oil reclamation services or permit these services to be provided by an outside firm without loss of warranty protection?

Additive Reconstruction
Will the lubricant supplier provide guidance and additive concentrates for large-volume lubricants where there is a need for in-service additive treatments (turbine oils, paper machine oils, etc.)? Which additives does the supplier permit to be reconstructed?

Disposal Services
If provided, what is included with the service?

Formulation Change Disclosures
Will the supplier disclose all significant changes in lubricant formulation that might impact performance and compatibility?

Telephone Support Services
Is there a technical customer support hotline with qualified people answering the phones?

Problem Testing and Troubleshooting
Will the supplier provide an analytical laboratory service, at no cost, to troubleshoot occasional performance and quality-related problems with lubricants?

Second-Tier Suppliers
Is the primary supplier able (and willing if requested) to manage the process of delivering specialty products (water glycols, phosphate esters, PTFE high-temperature grease, etc.) formulated by other lubricant suppliers?

Distributors
What will be the role of distributors, if any? How is the quality of the lubricant protected by the handling and repackaging of lubricants by distributors? How are distributors qualified and certified by the supplier-formulator? How are the distributors’ practices documented?

Warranty
What assurance is provided relating
to formulation quality or performance defects? Does it relate to just the oil? How about damage caused to machinery? What conditions can void the warranty? How are claims processed and decided?

Reputation
What is the supplier’s general reputation for delivering quality service and support?

Lubricant Scheduling Software
Is this provided and at what cost? What are the features and functionality of the software? Are training and support included? Will the software support competitive lubricants? If you change to another lubricant supplier, do you loose access to your database and software support?

Product Line
Capacity and Location of Blending Plants
Does the capacity and location of blending plants suit the customer’s needs in terms of efficient and adequate supply? How does the distance affect transportation costs?

Distributor Warehousing
Which products are shipped directly from the blending plants? Which are warehoused by the distributor?

Global Supply
Is there a need for international supply, blending plants, warehousing or technical support?

Diversity of Product Line
Can the supplier handle the complete needs of the customer or will other suppliers be needed to make-up for deficiencies?

OEM Approvals
What lube products have received “approvals” from which OEMs?

Industry Specialization
Do the supplier and the product range have an industry specialization? How well does it match the customer?

Packaging and Transport
Drums, Pails, Kegs, Tote Bins
What are these containers made of - plastic, steel, stainless? Are they new or reconditioned? Is there a service or rental program to recycle them (pickup and delivery) and at what cost? Is there a cleanliness specification? Can plastic liners be provided for use with drums and totes?

Bulk Supply
How is the risk associated with mixing of lubricants and cross-contamination between loads controlled? Are dedicated tank trucks provided for use with “lubricants only”? Is there a specific on-load, off-load sequence to protect against the risk of highly additized products (for example, motor oil) being followed by (and potentially mixed with)
products with low additive treatments (for example, turbine oil). Are lubricants discharged (off-loaded) through filters? If so, what is the beta rating of these filters? What are the service guidelines relating to tank flushing, breathers and hoses?

One-shot Containers
Are these available for different lubricant products? What is the cleanliness of these containers? How are they labeled?

Dates on Labels
Are packaged grease and oil products date-labeled by batch? Is a legible, standard dating system provided?

Oil Analysis (If Provided)
Test Slates
Which routine and exception tests are provided for each machine category? Can test slates be customized by machinery categories?

Sampling
What sampling frequency is included in the contract, or annual volume of samples? If sample bottles are provided, what size and material are they made of? Is the cleanliness of the bottles controlled and verified using ISO 3722 guidelines?

Lab
If an independent lab is used, which lab is it? Can alternate or multiple labs be selected? What is the reputation of this lab?

Unbundling
Can the cost of the oil analysis be unbundled from the lubricant supply contract if desired?

Limits and Alarms
Can the customer specify his own limits and alarms?

Reports
What information is provided on oil analysis reports? Are limits and alarms shown on the reports? How about new oil baseline data?

Quality
Is the lab certified by ISO 17025, ISO 9002 or 10 CFT 50 (nuclear qualified)? Does it participate in the ASTM Cross-Check program, or some other quality assurance program for used and new lubricants?

Inspection
Does the lubricant supplier make routine quality inspections of the lab? How often? How about blind sample testing?

Turnaround Time
What is the average and guaranteed turnaround time of the samples from receipt by the lab?

Competitive Lubricants
Will the lab offer oil analysis for competitive lubricants (not supplied by the primary lubricant supplier) for an additional charge?

Retains
How long is untested oil retained by the lab?

Data
Is the oil analysis data given to sales reps and field engineers?

Oil Analysis Software
What software, if any, is provided and at what cost? Will it support on-site instruments and multiple lab formats? Will it support competitive lubricants? What are the various features and functionality of the software? Is training and support provided? Does this program support the importing of previous analyses (data histories) by asset number?

Now, a word about price. Many people have heard of “life-cycle costing” when it comes to lubrication and related services. Simply stated, this important principle directs attention to the total cost of ownership as if the lubricant were a durable. The initial cost of a gallon of oil or pound of grease is not regarded as the main factor. Instead, other things that occur over time gain greater importance, such as how will the lubricants and program of services affect the following:

  • Rate of machinery wear and cost of repair
  • Reliability and lost production avoidance
  • Frequency of oil changes (lubricant consumption)
  • Energy consumption
  • Cost of handling and managing lubricants
  • Cost of filtration and contamination control
  • Cost of training and technical support
  • Economies of consolidating lubrication products and related services

The next time you award a supply contract for lubrication, take the time to actually determine your company’s needs. Begin by polling the stakeholders in the organization and close technical advisors. Create a list of factors, such as these listed here, that are potentially important and have the buying team weigh these factors in relation to the goals of the organization. The process may reveal that you have only been buying lubricants, when what you really wanted was “lubrication”. Conversely, the process may reveal that you have been paying for services that you don’t value, or would prefer to buy elsewhere.

When was the last time your company reviewed its lubricant supply relationship? Is there room for improvement to move your lubrication program steps closer to world-class? The savings and benefits may prove very rewarding.

Value-Judgment Process for Selecting a Lubrication Supplier

1. Assemble a representative group of stakeholders and technical advisors - your strategic buying team.

2. Explain and discuss the objectives and selection process.

3. Through the leadership of a knowledgeable and objective facilitator, brainstorm to identify what criteria are important to the organization.

4. Review the criteria and combine them into the smallest number of factors without compromising content. Refrain from comment about the value or importance of any criteria.

5. Using a modified Delphi technique, have each stakeholder secretly rate the condensed criteria list using a value scale. No discussion about the value or importance of the criteria should occur. The secret ballot helps to limit group bias.

6. Have the facilitator gather the rating information and present the mean, median and range for each criterion to the group. Again, no discussion about the results is allowed.

7. Team members are then given a chance to re-rate the criteria using secret ballots.

8. The results are again presented to the group. Usually, the distribution tightens at this point.

9. Open the floor for discussion about the criteria.

10. Accept the group’s decision. Proceed with the structured evaluation of lubricant suppliers with confidence. The process is carried out by interviewing candidate supplier representatives, studying their proposals in detail and talking to references. Score the information that is gained for each supplier using the system of weighted value factors.

Benchmarking Lubricant Suppliers by Product and Service Offerings Conference Session
Participate in this new interactive two-hour session at the 2002 Practicing Oil Analysis Conference and Exhibition. Session attendees will participate in the first-ever industry benchmarking targeting a range of topics important to customers and suppliers of lubricants and related services. Conference delegates who are lubricant consumers will be asked to submit detailed questionnaires defining their lubrication priorities and goals with respect to achieving world-class lubrication. These questionnaires will be compiled and presented to session attendees followed by discussion of each element. Find out how other companies assign value in making lubrication supplier decisions and how this contrasts to actual supplier performance. If you buy, sell or use lubricants, don't miss this session!

 


About the Author

Jim Fitch, a founder and CEO of Noria Corporation, has a wealth of experience in lubrication, oil analysis, and machinery failure investigations. He has advised hundreds of companies on developing their lubrication and oil analysis programs. Contact Jim at

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